Mfg en Case Study Satin Creditcare Network Limited Unique in Its Field 2006 (1)

7/23/2019 Mfg en Case Study Satin Creditcare Network Limited Unique in Its Field 2006 (1)

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SATINCREDITCARE

NETWORKLIMITED

Unique in its Field

Navneet Daga

Centre for Micro Finance

Institute for Financial

Management and Research


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ContentsFOREWORD ................................................................................................................................... 1

OVERVIEW .................................................................................................................................... 1

INTRODUCTION ............................................................................................................................. 1

MOTIVATION ........................................................................................................................... 1

THEURBANMARKET............................................................................................................. 2

SATINCREDITCARE....................................................................................................................... 2

BUSINESSSTRATEGY ................................................................................................................ 2

LEGALSTRUCTURE ............................................................................................................ 3

OPERATIONS........................................................................................................................... 3

AREASCOVERED ................................................................................................................ 3

CUSTOMERS ...................................................................................................................... 3

PRODUCTS& SERVICES ...................................................................................................... 4

DISTRIBUTIONCHANNELS .................................................................................................. 5

COLLECTIONSYSTEM ........................................................................................................ 5

SACALABILITY .................................................................................................................... 6

FUNDINGFORTHEINITIATIVE .................................................................................................. 7

CREDITRATING ...................................................................................................................... 7

OPPORTUNITIES& CHALLENGES.................................................................................................... 8

PLANNINGFORTHEFUTURE.................................................................................................... 8

CONCLUSION ................................................................................................................................. 8

APPENDIXA .................................................................................................................................. 9

M-CRIL ................................................................................................................................ 9

CENTREFORMICROFINANCE..................................................................................................... 10

INSTITUTEFORFINANCIALMANAGEMENTANDRESEARCH............................................................ 10


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ForewordSatin Creditcare Network Limited: Unique in its Field is part of a series of cases conducted

by the Centre for Micro Finance at the Institute for Financial Management and Research. The

purpose of the case studies is to identify innovative practices among MFIs operating in the urban

space, particularly strategies for broad basing their clients, financial services offered, and community

involvement. The study presented in the following pages provides an in-depth look at how Satin

Creditcare integrates a strategic approach to overcoming operational challenges in the urban space.

Information on the case studies of other MFIs in the series is available by contacting the Centre for

Micro Finance in Chennai, India. The Centres website is ifmr.ac.in/cmf.

OverviewWhen considering the concept of microfinance, the idea of a group often first comes to mind. Group

formation, training, savings, lending, peer pressure, and joint liability mechanisms are all phrases

typically associated with microfinance in Indiafrom the countrys domestic self-help groups (SHG)

to imported peer-based lending models. In general, microfinance institutions (MFIs) begin their op-

erations within a context of group lending in order to alleviate the traditional constraints of a lack of

collateral and information about and among clients. Over time, it is observed that institutions com-

mence individual lending based on the individual credit histories of clients, which is often based on

timely repayments.

Satin Creditcare Network Limited (Satin), a leading Indian MFI registered as a non-banking financecompany (NBFC), is an institution that operates very differently from the typical microfinance or-

ganization. Since its inception in 1990, Satin has run an individual lending business without first

working through group-based activities, which has set the Delhi-based MFI apart in the sector. Ac-

cording to the organizations founder and Chairman, Mr. Harvinder Pal Singh, Satin was conceived

as a purely commercial enterprise and, at the time, he was unaware of the concept of microfinance,

in India or elsewhere. Over time, it became apparent, however, that the institutions activities were

in fact characteristic of a MFI.

Nevertheless, Satin has stood out among its competitors with three particularly unique features of

operations: daily finance schemes, a self-sustaining model, and highly professional management. In

addition, the company is now listed on the Delhi, Ludhiana, and Jaipur Stock Exchanges. Despite its

success, however, the companys promoters will have to keep in mind a key challengesources and

costs of capitalparticularly since Satin has been largely funded by its promoters, given the absence

of either state or donor grants or subsidies.

IntroductionMOTIVATION

Initially, at the time when Mr. Singh was working in Delhi as a chartered accountant at Sriram Hon-

da, a generator set manufacturer, Citibank was the only traditional financial institution offering small

SATINCREDITCARENETWORKLIMITED 1


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unsecured financing to individuals. On one particular day, however, Mr. Singh observed a panwala1purchasing a small television set on a rent-to-own scheme, in which an individual pays Rs. 10 per day

for a given period of time after which he owns the item. After watching more and more people taking

part in such a scheme, Mr. Singh wondered if he might exploit the same concept to sell generator

sets, particularly to those from lower income households, who were unable to make large lump sum

payments. At the same time, such an idea was thought to serve as a sound business proposition withthe potential to achieve both sustainable and scaleable operations.

Thus, with the goal of providing affordable working capital finance to low-income small business

owners to encourage expansion, greater profitability, and increased employment in local communi-

ties, Mr. Singh commenced his operations. He chose to start in East Delhi, long considered a highly

undesirable area by most financiers because it borders parts of the state of Uttar Pradesh that have

historically been rife with criminal activity and lawlessness. It was his opinion that if the business

could succeed in this locality, it could develop and succeed in many other parts of Delhi and India

as a whole.

THEURBANMARKET

While it was not a conscious effort to only target an urban market segment, this decision was made

when Mr. Singh started operations in the fully urban city of Delhi. Based on market research, Satin

estimates the total population of Delhi and the National Capital Region (NCR) at 20 million. The

number of people living below U.S. $2 is approximately 2 million.2Within this market, Satin has

identified great potential to serve large sections of low income individuals that struggle without access

to financial services, but are not considered destitute. Satins clients also include those above the pov-

erty line but are un-banked and lack credit. Within this segment, Satin has also found that it is often

the case that salaried individuals are more easily served by commercial banks, while self-employed

men and women, who typically lack proper documentation required to satisfy institutional/legalformalities, turn to MFIs.

Satin CreditcareBUSINESSSTRATEGY

When Satin first became operational, the companys initial product offering was financing generator

sets, in collaboration with Sriram Honda, with a daily recovery schedule. Based on Satins findings

that clients could and would make timely repayments in order to take out larger loans for other activi-

ties, the company entered the business of financing durables for a mix of consumption and business

uses.

Beginning with a capital base of Rs. 50,000, the company has grown over the past 16 years into a

credit portfolio of Rs. 13.68 crores,3with much of this growth taking place over the past year.4The

active client base currently stands at 6,631 individuals, with female clients comprising three percent.

Most clients are between the ages of 45-50, but the companys youngest client has been 23 years

old.

1 A small pan seller. Pan is an Indian preparation concocted from beetel leaves.

2 As of June 1, 2006.

3 A crore is an Indian unit of measure equal to 10 million.

4 As of March 2005, the companys portfolio was Rs. 8.5 crores.

SATINCREDITCARENETWORKLIMITED2


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In terms of expansion, Satin has always pursued a dual strategy of horizontal and vertical expan-

sion, recognizing the fact that, as a financier, they must allow their target markets to mature over time

and there is great risk in accelerating too quickly with existing clients in only one geographical area.

Thus, while the company does plan to penetrate deeper into existing areas of operation, Satin is also

starting operations in new locations. Whether short or long run, Satins business strategies are largely

determined by the stability and volume of financing they receive and, as such, Mr. Singh and histeam have adopted a very adaptable corporate strategy going forward. Broadly speaking, Satin plans

to expand further across northern India over the next two to three years.

Legal Structure

In 1990, when Satin was first conceived, the company was registered as a private limited company,

and has operated as a non-banking financial company ever since. While Satin was permitted to ac-

cept public deposits during its first few years of operations, the company has since stopped this prac-

tice in November 2004, given regulatory changes implemented by the Reserve Bank of India.

OPERATIONS

Areas covered

Since its inception in East Delhi, Satin has expanded its operations to five regions throughout Indias

capital cityNorth, East, South, West, & Central Delhi. In addition, the company has recently start-

ed operating in semi-urban areas, such as the neighboring towns of Guragaon, Faridabad, Panipath,

and Sonipath in Haryana and Noida in Uttar Pradesh. In fact, Satin has recently opened its very

first branch office in Panipath. Previously, Satin ran operations in Chandigarh as well as two cities in

Haryana, Jalandhar and Ludhiana, in the 1990s when it relied partly on public deposits to on-lend.

Today, Satin is now going back to those same locations to start operations again backed by funding

received from the Small Industries Development Bank of India (SIDBI) in 2005.

Satins head, and until recently, its only office is located in North Delhi. Yet given that clients benefit

from the companys services at their doorsteps, individuals do not find it necessary to take time out

from their busy schedules to visit the office. To date, Satins clients have not expressed a need for

more than one office in Delhi for this reason. Since the company has only recently entered areas in

Uttar Pradesh and Haryana, it is too early to gauge if additional offices are required. Currently, these

newer areas are serviced by local collection officers, but Satin is willing to opening branch offices at

these locations as the number of clients and demand increases.

Customers

Under the companys unique daily finance scheme, one of

the most important requirements to join Satin is that an in-

dividual should have a daily or otherwise frequent cash flow.

With this criterion, the majority of the companys portfolio is

recovered on a daily basis, leaving approximately 20% recov-

ered in monthly and 1-2% in weekly installments. The ratio-

nale for the daily recovery schedule is based on two factors:

(1) the observation that Satins clients run businesses that gen-

erate daily income flows, and (2) Satins belief that it is best

to match the recovery schedule to the inflow of cash in theclients hands.

Satins clients are primarily tiny, small and medium enterprise


TYPICALPROFILEOFA

SATINCUSTOMER

Education Class X

Marital Status Married

Dependent 4

Wife Unemployed

House Type Own

House Since > 10 years

Shop Since > 10 years

Shop Area 8 x 10

Shop Employee 2

Shop Sale Rs. 1,200/day

Any Vehicle No


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owners engaged in various types of activi-

ties, including fruit merchants, beauty salon

owners, general merchants, small transport-

ers, restaurant and dhaba5owners, roadside

hawkers, repair shops, maid servants, veg-

etable vendor, petty traders, shopkeepers,small factory owners, and others that seek

credit for economically productive purpos-

es. Unlike many MFIs, the company does

not exclusively target or focus on women

and runs its operations without a gender

bias. Given Satins joining requirement of

a frequent cash flow, the company tends to

attract small and medium-sized traders who

are primarily male.

Products & Services

In order to meet a wide range of business

needs, Satin has moved beyond only financ-

ing generator sets to develop three versatile

products for its clients: working capital loans,

asset hypothecation, and micro insurance:

The companys first product, a work-

ing capital loan, has been designed

to satisfy the productive needs of a

micro enterprise through either sea-

sonal requirements or growth invest-

ments. Working capital loans form a

large component of the companys

total portfolio, and Satin envisions further expansion with this product. The loan amount

disbursed generally depends on a potential borrowers daily sales figures. According to Satins

calculations, the ability of a micro entrepreneur to repay is estimated at 12% of his daily

sales. Based on this fact, the amount of credit to be sanctioned is calculated accordingly, and

repayment schedules include both the principal and interest rate to be collected. Satin cur-

rently charges an interest rate of 32-33% on a diminishing annual basis6, and the maximum

loan tenure is one year.

Satins asset finance loan was developed with the understanding that a micro enterprise re-

quires a variety of equipments, from two-wheelers to machinery and computers. In this case,

rather than providing clients with cash directly, the company acts as an intermediary and

directly contacts dealers on their clients behalf. A client then collects the required asset from

the dealer who is directly paid by Satin. Under this arrangement, the Satin client is required

to pay a down payment of 10-15% of the assets value, and the interest rate charged is less,

given the intense competition in this segment from commercial banks and other financial

institutions, such as those backed by Tata and Birla business houses, in addition to the dealers

themselves. Currently, this segment of Satins portfolio is largely comprised of vehicle financ-

ing.

5 A dhaba is a roadside food establishment.

6 As per information provided by Satin Creditcare.


Mohammed Furkan Khan, age 28 is an owner of a general

store. He and his brother Faheen, featured in the above photo-graph runs the shop. Furkan is married and has two children.

Prior to borrowing from Satin, they were running the same busi-

ness but they didnt have enough capital to make investments and

try to expand. Then they heard about Satin and they took their

first loan in 2003. Currently they are in their 6th loan cycle. On

an average, they took Rs. 40,000 in each cycle and each time,

the purpose of the loan was to satisfy working capital needs. At

the time of the first loan from Satin their average daily sale was

Rs. 2,500 and they offered a limited variety and stock of goods.

Today, their average sale is Rs. 5000 and they have also started

selling bakery items and a larger variety of cosmetic items. Theyrepay all loans on time and are happy with Satins services.

They want to increase their next loan amount to Rs. 50000.


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Given that the share of working capital in the overall portfolio has increased significantly over

the past year while vehicle financing has declined, Satin is planning to further increase the

share of working capital in the total portfolio.

Beginning on July 1, 2006, Satin has rolled out its third product offeringmicro insurance.

In collaboration with the insurance company Max New York Life Insurance, Satin plans toencourage current clients to take up both accidental death and life insurance, which has a

maximum coverage of Rs. 30,000. The targeted age group for both products that have a one

year tenor will be individuals between 20 and 45 years. Based on the success of these initial

micro insurance products, Satin will offer health insurance coverage to its existing clients as

well.

Distribution Channels

The first step for an individual that has become aware of Satin and is interested in obtaining ac-

cess to credit is filling out a loan application. Based on the companys current operations, there are

several ways in which an application can originate. There may be zealous collection agents that ap-proach shopkeepers and traders in local areas about their financial requirements. Some individuals

may call Satins head office after hearing about the company and its activities. In Delhi, Satin is also

well-known among dealers of goods, such as air conditioners, refrigerators, and two-wheelers, that

introduce their clients to the company for financing options. An existing customer may spread word

of mouth advertising for the company among his/her peers, and, in some cases, stand as a guarantor

for new borrowers. In fact, over 50% of new clients are referred to Satin by existing clients. Once

the company has found approximately ten clients in a given area, it is often the case that collection

officers do not need to put in as much effort in marketing since new customers often find their way to

Satin after talking with existing clients.

Initially, the data collected in the application form is very basic since only questions such as name,address of the shop, and the loan amount desired are asked. Once this data is entered and the appli-

cation is passed onto the loan verification officer, an enquiry is made about each potential client in a

given area through his own sources, who are generally existing clients in the same area. The enquiry

consists of asking about a potential clients reputation, business, sales, and repayment capacity. Next,

the loan officer meets with the loan applicant to collect information on his daily sales, status of home

and shop ownership, requested loan amount, and the purpose of the loan. At the same time, he veri-

fies the clients answers against information collected informally from peers. If the verification officer

is satisfied, he approves the loan by completing the application and assessment forms. As mentioned,

the sanction loan amount will be less than 12% of a clients daily sales, depending on the business.

For example, if a client is selling perishable goods, such as fruit, then the sanctioned loan amount willbe relatively low, since the perceived risk is high in such businesses. Once the loan officer calculates

the loan amount to be sanctioned according to Satins set criteria, both the borrower and guarantor

must sign all formal documentation and provide identity proofs as well as a blank cheque if either has

a bank account. Next, Satin cross verifies all necessary information with the borrower and guarantor.

Once these formalities are complete, the applicants file is reviewed by Mr. Singh who makes the final

approval. There are cases when the Chairman may ask for an additional guarantor or reduce the

approved loan amount. Overall, Mr. Singh rarely rejects any application. In the case of a working

capital loan, payments are made by either cheque of cash. For those individuals requesting a vehicle

loan, an advance down payment is required.

Collection System

It is important to note that all approved loan applications are entered into a computerized master

database, from which two collection cards bearing the details of the loan and repayment schedule are



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generatedone for the

client and one for the

collection agent. Col-

lections are done by a

Satin officer according

to a schedule agreedupon by the client,

ranging from daily to

monthly. A receipt is is-

sued to the client after

each payment is made

and two copies of the

receipt are provided to

the head office by the

collection agent. The

receipts are enteredinto the head offices

records on the same

day of receipt. In addi-

tion to issuing a receipt

to the client, the collec-

tion agent must sign the

clients collection card

and vice versa. Once a

Satin client has repaid

the full loan amount, a

no objection certificate is issued to him by the company, which is a practice unique to Satin.

Sacalability

Going forward, Satin faces the challenge of managing both growth and scale in addition to adequate-

ly fulfilling the needs of its expanding client base. Over the past yeah, the companys portfolio has

grown from Rs. 8.5 crores to Rs. 14 crores, and Mr. Singh expects Satins portfolio to double by the

end of 2006 and reach approximately Rs. 100 crores by the end of 2010. According to the companys

research, the potential of its market is no less than Rs. 1000 crores.

Given that Satins cash lending business is primarily driven by its greatest resource, manpower, the

company will have to effectively this strength while scaling up operations and enlisting more humanresources. Since the company remains committed to further working in its existing areas of operation,

recruiting those with strong knowledge of locals will be an asset to tap into new communities. From

its client base of just over 6,000 to its goal of 9,000 by the end of 2006, Satin continues to position

itself as a strong player in the microfinance sector in Delhi. Given that there remains a lack of formal

competition in providing finance to the low-income market segment in Delhi, Satin remains in an

advantageous position. At the same time, urban moneylenders operate only on a small scale and in

select areas. The typical moneylender will offer an unsecured loan at a monthly interest rate rang-

ing from five to ten percent with daily collections. The

normal loan tenor is one to two months with a maxi-

mum of six months. Despite their constraints, howev-er, urban moneylenders maintain an edge over Satin

with clients suffering from emergencies, for example.

For those that cannot wait for Satin to go through its


31/03/2006 31/03/2005

Total Portfolio 1,368.10 846.44

Portfolio at risk >60 days on as on

31/03/2005 (As per

M-CRIL report)

7.50% 7.10%

TWOCOLLECTIONCARDSAREGENERATED

FROMCOMPUTERWITHMASTER

DETAILANDCOLLECTIONSCHEME

Card 1 for customer Card 2 for collection staff

Collection made by the

customer and receipt is

issued in triplicate.1st copy for customer

2nd copy for office Enter receipt detail in both cards

Data entry of receipt in

computer and all related

accouns are updated

Monthly checking of cards

with computerized records

3rd copy is master-copy

No objection certificate is issued

upon reciept of final payments


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pre-disbursement formalities, which

can take a few days, quick and easy

access to funds from local moneylend-

ers becomes increasingly attractive in

times of need. To meet the emergency

needs of existing and potential clients,Satin is considering designing a credit

product that would take a maximum

of two days to disburse.

FUNDINGFORTHEINITIATIVE

As mentioned, Satin started by selling generator sets on credit with Rs. 50,000 of start up capital.

Satins first source of capital funds was the State Bank of India (SBI), which lent Satin Rs. 2.5 lakh

in early 1990. In 1998, Satin began working with Andhra Bank instead since the company benefited

from a higher credit limit of Rs. 2.25 crores, despite a higher interest rate of 14.5%.

After March 2005, the companys financial landscape changed dramatically as Satin gained access to

funds SIDBI, ICICI Bank, HDFC Bank, The Bellwether Microfinance Investment Fund, UTI Bank,

Maanaveeya Holdings & Investments Pvt. Ltd., and IndusInd Bank Limited. Currently, ICICI Bank

is the primary financier of Satin at an interest rate of 9.75%. At present, the company has a total

capital base of Rs. 3.55 crore, in which 50% stake lies with the promoters and the other 50% stake

is with public. As of 31st March

2006, Satin maintained a debt to

equity ratio of 3:1.

CREDITRATING

Satins credit rating has main-

tained a credit rating of Alpha

Minus, issued by Micro Credit

Rating International Limited (M-

CRIL), for two years consecutive-

ly (See Appendix A for more informa-

tion on the M-CRIL ratings). Andhra

Bank has given a credit rating of

A+ to the company. According to

Mr. Singh, the reason why Satinwas not awarded a higher rating

is because of the companys rela-

tively high portfolio at risk (PAR).

While Satins default rate is neg-

ligible, which means there are

delays but zero defaults, its PAR

is an operational feature result-

ing from its exclusively individual

lending operations.


As on March

31, 2005

As on March

31, 2006

No. of Loans Disbursed 4,447 6,061

Amount of Loan Disbursed (Rs. Lakh) 1,367 1,993

Average Loan Size (Rs.) 31,000 33,128

Average Loan Tenure (Months) 11 12

No. of Male Clients 4,312 5,846

No. of Female Clients 135 170

No. of Active Clients 4,767 6,631

CALCULATIONFORBORROWER

The table below is a small section of the borrower table.

Criteria Max. Received Remarks

Age 3 3 36

Marital Status 3 3 Married

No. of Dependents 3 3 3 Dependents

Spouse Working 3 0 Unemployed

Place of Shop 3 3 Own

Owns a Vehicle 2 1 2 Wheeler

Qualification 2 0 Undergraduate

No. of Employee 3 0 0

Working at Present Location Since 3 0 3-4 yrs

Total Points to Borrower 25 13 (52)

CALCULATIONFORGUARANTOR

The table below is a section of the guarantor table.

Criteria Max. Received Remarks

Age 3 3 30

Marital Status 3 3 Married

Place of Residence 3 3 Own

Place of Shop 3 0 Rented

Working at Present Location Since 3 0 3 to 4 yrs.

Either residence/ shop telephone 1 1 9891383596

Old/ New Party 1 0 New

Total Points to Guarantor 17 10 (58.82)


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Opportunities & ChallengesPLANNINGFORTHEFUTURE

In order to more objectively rate prospective borrowers and determine the risk of offering credit tothem, particularly in the context of individual lending, Satin continues to set itself apart in the mi-

crofinance sector by preparing an individual score sheet for credit assessment.

How is credit scoring done? Scoring is done on the basis of how a potential clients characteris-

tics reduce the risk of his/her default and, similarly, with the guarantor. For example, if a borrower is

married, presumably, it will not be as easy for him to migrate. Similarly, if the borrower has children,

his wife is also employed, or owns his residence, he will get receive additional points for this same

reasonincreasing difficulty in leaving current place of residence.

What is the rationale behind credit scoring? Satins current client base is not very broad and

can be easily managed. However, looking ahead, it will not be possible for Mr. Singh to personally

approve or reject every loan application. Thus, Satin is eager to develop a score based system of

credit assessment and approval. Satin piloted its model in January 2006 to get a better idea of how

the scoring would work in terms of pass marks.

GOVERNANCE& LEADERSHIP: The Chairman, Mr. Singh controls both the back office and the front

office, and works with a team of financially skilled professionals. This is an aspect rarely seen in other

Indian MFIs.

RETAININGCLIENTS:Historically, Satin did not work particularly hard at retaining clients as its over-

arching concern was bleak access to capital funds. As the companys situation has now reversed dra-

matically, Satin must look more closely at this issue.

HIRINGSTAFF:Satin does not demand high professional qualifications from its collection officers, and

new officers are often referred by existing collection staff. As a rule, verification officers are always

chosen from within the organization, given that the position requires very good local knowledge and

experience.

EMPLOYEEINCENTIVESANDTRAINING:Once hired, new collection officers are trained on the job by

existing officers for approximately one week and then tested. If the new officer does pass the test, he

is able to manage his own market. Currently, employee incentives offered to collection officers in-

clude commissions on case bookings, achieving a collection rate of 100%, and the number of clients

acquired.

MIS:Satin uses Fox Pro for its accounts, and has a trained and efficient staff overseeing the system.

All data is recorded electronically within a tight timeline.

ConclusionWhen compared to many other MFIs in India, Satin stands apart in the crowd for the companys

for-profit motive from the very beginning. Mr. Singh has chosen to develop his companys core com-

petency of originating and servicing loans to traders and small businessmen in Delhi and neighbor-

ing areas of Haryana. Given the lack of demand from clients, he has not gotten involved in any

supporting activities common to other MFIs, such as business training, consulting, or marketing. In

fact, Satin has the look and feel of a traditional financial institution on a smaller scale. The companys



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current scale can be attributed to its initial difficulty in attracting sufficient funds for on-lending. Over

the past year, however, Satin has proven itself capable of developing its business, as seen by its high-

profile investors, high growth, and determination to continue providing better financial services to

low-income individuals. As the companys clients mature in the coming years, it is likely that they will

express interest and demand ancillary products and services from Satin. At that point, Mr. Singh will

need to make a decision about the future of his companythat is, if Satin should branch out into afull service financial institution or remain focused on doing what it does best.

Overall, Satin Creditcare Network Limited has done well by filling in a gap in the credit market and

fulfilling the needs of people who would have otherwise only been served by informal moneylend-

ers at relatively high interest rates. By lending to low-income individuals, Satin is helping to not only

boost local business productivity and employment but uplifting the poor out of debt traps. In the cur-

rent state, it would be difficult for a new player to enter this market in Delhi and compete with Satin,

given that, over the past 16 years, Satin has managed to build a reputation for its highly demanded

products and services. With so much of potential left in the microfinance market in Delhi and sur-

rounding areas, Satin is expected to continue its success. At the same time, it could be challenging for

Satin to enter a new market with its relatively high interest rate and staunch joining requirements,

such as requiring bank account holders to provide blank cheques, especially in areas where microfi-

nance already exists. Going forward, these are just a few of the challenges Satin could encounter, and

in order to maintain its success, Mr. Singh and his team must formulate policies and more innovative

products and services accordingly.

Appendix A

M-CRIL

M-CRIL performs credit rating and risk assessments of microfinance institutions. M-CRIL has un-

dertaken over 275 ratings and assessments of MFIs across 13 countries in South Asia, South East

Asia, Central Asia and the Pacific. M-CRILs Ratings provide a credit risk outlook of the rated MFI

and an assessment of the areas of strength and weakness in its operation.

M-CRIL Grade Description

+++: alpha triple plus Highest safety and excellent systems. Most highly recommended.

++: alpha double plus Highest safety and very good systems. Most highly recommended.

+: alpha single plus Very high safety and good systems. Highly recommended.

:alpha High safety and good systems . Highly recommended.

: alpha minus Reasonable safety and good systems. Recommended.

+: beta plus Reasonable safety/systems. Recommended, needs monitoring.

:beta Moderate safety/systems. Acceptable, needs improvement to handle large volumes.

:beta minus Significant risk and poor to moderate systems. Acceptable only after improvement.

+: gamma plus Substantial risk and poor systems. Needs considerable improvement.

:gamma Highest risk and poor systems. Not worth considering.



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Centre for Micro FinanceThe Centre for Micro Finance will help improve the life of the poor by:

Systematically researching the links between access to financial services and the participation

of the poor in the larger economy.

Participating in maximizing access to financial services and its impact for the poor through:

Research on micro finance and livelihood financing

Research-based policy advocacy

High-level training for practitioners and institutions

Strategy-building for Micro Finance Institutions.

While the microfinance sector has been growing rapidly with the focus largely on growing outreach,

there is an urgent need to fill some gaps in the practice and in the understanding of microfinance in

order to maximize and accelerate the impact of its growth. The Centre does not posit that micro-finance is the sole response to poverty alleviation. However, it does believe that relaxing the credit

constraint for the poor, even the extremely poor, can produce a positive impact on their lives and that

providing complementary financial services can have a great impact on the reduction of poverty and

vulnerability. The Centre also believes that the impact of microfinance can be maximized if other

contextual constraints that prevent poor households from participating in the mainstream economy

are simultaneously addressed.

The approach the Centre wishes to take in its research and advocacy role is to continue to propagate

the prior while simultaneously and continuously seeking to update it and inform it through rigorous

research. In order for research to influence action, it is also critical to create an environment where

researchers and practitioners constantly interact and exchange information and ideas.The Centrefor Micro Finance aims to achieve its objectives through research, training, and strategy-building for

MFIs through its MFI Strategy Unit (MSU).

Institute for Financial Management

and ResearchIFMRs mission is to contribute to growth and development efforts in India with a focus on financialservices and financial management within Indian companies and governments. IFMR is a leading

business school with strengths in both research and teaching focusing on the financial sector. IFMR

was founded in 1970 as an autonomous institute with backing from ICICI, the House of Kotharis

and other major corporates. IFMR has established Centres for Advanced Finance and Micro Fi-

nance to conduct cutting edge research and training in these areas. IFMR also manages the ICICI

Research Centre and sponsors the Journal of Emerging Market Finance. Recognized as a Social

Science Institute by the Department of Scientific and Industrial Research, Government of India,

IFMR has also been approved as an Institution of National Importance by the Ministry of Finance.

IFMR currently offers a 2-year full-time and 3-year part-time Post Graduate Diploma in Manage-

ment (PGDM) with specializations in Finance, Marketing, HR and Operations & IT and a one-year

full-time masters level program in Advanced Finance. The Institute also offers short-term executive

development programs and consulting services. IFMR has been granted affiliation by the University

of Madras for students pursuing a PhD in Finance and Economics.



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Centre for Micro Finance

Institute for Financial Management and Research24, Kothari Road, Nungambakkam, Chennai 600 034, India

Phone: (91) 44 28228194 Fax: (91) 44 28279208

Web: www.ifmr.ac.in/cmf

Documents

Mfg en Case Study Satin Creditcare Network Limited Unique in Its Field 2006 (1)